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Friday, October 31, 2008

Tuesday’s diary entry turned into a piece over at HuffPo they called “Why are Goldman’s Women Partners Invisible?” It is the most important piece of writing I have ever put out in to the world. The combination and timing of Goldman’s New Partner and MD Announcements, Bloomberg Market’s Magazines Cover piece on Lloyd Blankfein and the Goldman Alumni, and Goldman’s lack of comment to it, created a moment that I was called to respond to in a big way. CALLED. This piece is about the absence of Women’s Leadership, broadly. So if you are a woman at Goldman now, and reading this, please know I pray, pray, this piece helps and not hurts.

I continue to be so grateful to Goldman Sachs for so many things but on this issue, on the issue of Womens Leadership, I expect more of them. That is why I left six years ago, because I felt I had done all that I could do there and I was tired. (and I am sure many of the people there were tired of me) Well, I have gotten my energy back. That Bloomberg article ignited me.

Please think about posting a comment on the HUFFPO OPED if it resonates with you and link it around to everyone you know. Everyone. To those of you who are new to this blog, a big hearty welcome! Please join my mailing list to the right by entering your email address.

With so much going on in the markets right now and in the world in general, and so much going on within me, I've decided to put my thoughts out there in a new way. Through the newsletter, I'll share the lessons I learn from my various meetings with movers and shakers, links to what I'm reading, and news and views about money, markets, and changing the world--one purse at a time. I will also be asking other thought leaders to author letters as well. My dream is to make this effort a vehicle for empowerment and positive change. Simply enter your email address in the box to the right.

I just had a great idea. For all you women reading this… next year, let’s agree, to all wear Wonder Women costumes for Halloween! The more SHEROs in the world the better, even if it is just for one day. Actually..... I invite men to wear them too.

Tuesday, October 28, 2008

Today was a busy day. I am doing something today that I have never done before on this blog: truly letting it rip. Why today? Because it was one of the most interesting days I have had in my life, and by the way, I have had a few.

There was no one thing, but rather the diversity of topics that I explored today, combined with whom I explored them, that made it exceptional. Warning: this is long, perhaps too long, but that is in part why I am developing a newsletter so subscribe now to the right!!! If you don't have time to read it all, jump to the end where I get fired up about women and leadership.

I begin with my journal entry on the way home on the train tonight:

The morning began at 5am when I woke up with a big kink in my neck.. ouch. By 7 am I was on the train settled in to my hour of reading. The first piece was John Mauldins (must subscribe now), my favorite of all the investment newsletters, which basically said everything I would want to say but better. Almost at Grand Central I hit the last page of the front page of the FT (my fave newspaper) and was delighted to read an oped by Jeffrey Sachs as I was to see him again this afternoon (read the piece!). Dashing from the train I made it early to the Fortress Private Equity Conference, an event I was very much looking forward to as I am an investor in many of their funds.

I was deeply interested in how my investments were doing in this environment. Note, I was not so interested in how they were doing on a marked to market basis, but rather how they likely going to be doing longer term. I was also very interested in finding out whether the private equity model was fundamentally broken. After listening to four hours of investment updates, I was pleased that my investments are likely to be ok over the longer term, but the old private equity model is somewhat broken. The meeting validated what I already knew: credit markets continue to be frozen for most corporate borrowers and will remain that way for some time. Survivors will have smart operating managers (and investors) that either thought ahead, or are able to renegotiate their debt, and heaven helping, are cash flow positive. It is a world of tremendous risk, and tremendous opportunity.

By the way, all the presenters were men and there were mainly men in the audience. I was the only woman who asked a, well, several, questions.

Next it was off to Circle Financial Group for a discussion with a very cool investor about his approach to managing his family’s assets. CFG is a group of women that meet regularly to share investment ideas, networks, and knowledge around a variety of wealth management topics. We have been together for 6 years and it has been an absolute blessing in my life for 100 different reasons. The investor shared with us that he thought the traditional wealth management was broken, and we responded, why do you think we set up CFG?

Although there are great people out there at traditional 'full-service' wealth management offices (GS, MS, ML, Citi, JPM, NT....), with a few exceptions, it is about product and execution fees. It is more about getting you into product, then getting you out. Over the past year as I have pulled assets out of many funds and managers because of my growing concern over the financial condition of our economy and system, no one ever said "Jacki, you are making the right decision for you and your family." At CFG we have spent collectively thousands of hours finding the best of the best, and it is hard. Very hard. A dear friend of mine suggested I read the book Simple but Not Easy about investing. It is not even simple. We are on a mission to share what we have learned with the world and to help women get financially organized and be financially empowered. We cannot fully delegate the management of our money. Money is a precious resource and a tool to change the world.

Next I rushed off to catch up with a friend, Leslie Bennetts, who wrote a very controversial book called “The Feminine Mistake,” and writes regularly for Vanity Fair and Portfolio Magazine. I met Leslie years ago… a whole other long story… and I think she is fabulous! She had the courage to go to a place where a lot of us women are not comfortable going and that is to talk about the economic consequences of choices women make. She got blasted for suggesting that women should perhaps think twice about leaving paid work as if it was some complete slap against motherhood. She was not slapping mothers, she was giving us a wake up call. Again the theme, women and economic empowerment. Read the book!

We moved on to talk about the current crisis and what it meant for women. Not good. Would corporate Amercia still be committed to their diversity programs? That is the question that diversity leaders would be gathering to talk about in the morning at the National Council for Research on Women's Corporate Circle Meeting. I will report back. I could not help but ask her, “Leslie, don’t you think it is time we know what Women's Leadership might look like?” (a question my friend Marie Wilson always asks). Men have ruled the world in general, forever… and although there have been good times, right now it ain’t looking so good and I for one would really like to know, if women ruled the world what would that be like? (again topic for another newsletter and more below... keep reading)

That bridged very nicely into my next gathering which was at the Earth Institute for a discussion with Jeffrey Sachs about the progess and the challenges in the Millennium Villages. For one hour Jeff spoke, without notes, about what it would likely take to create sustainable development for the poorest of the poor in this world. To Jeff, and to many other leaders in this field, it is about empowering women and girls especially, and men and boys also (my words not his). Jeff did say, women do most of the work in these villages. Women, given the resources, make it happen. Even Goldman Sachs said that with their 10,000 Women Initative. The world of economic development recognizes that it is all about women, yet in this country we have somehow missed that point.

Jeff criticized the past two US administrations for failing to care about the world's poor. He said that we give virtually no money to help people, help people, around the world. We put our money where our values are, so take a good look at the US budget and get ready to cry. You must read more about this fabulous man and support his work now more than ever. I am getting ready to write him a big check and I hope you will consider writing him one too. A newsletter on his work is to come.

A subway ride and 5 blocks later I ended up at dinner with three friends in the heart of New York City. My head was exploding and I could not wait for a cosmo. We quickly caught be up with what happened in the financial markets today!!!!!!! Equity markets exploding for various reasons, short covering on Volkswagen (up 425% today) causing substantial damage to hedge funds and investment banks now bank holding companies, dramatic currency moves. To say that what we are experiencing is financial chaos would be an understatement. We launched into a long discussion about personal versus professional money management, the merits of hedge fund compensation structures, the true value of gold and the future of the world economy. Exhausting those topics we moved on to Women's Leadership. At this point I got a little fired up.

I am going to say something bold, something I have never written down for other eyes to read: As women, in this country, at this moment, and especially as women of means, with resources (time, treasure and talent) we have failed.

Failed.

We have failed to use our power to make significant change, and by that I mean to make the world a more just and equitable place. Notice I did not say you have failed. I say we have failed. I want to acknowledge that we have tried, and for many of us tried very, very hard, and often with few resources and little help, to try to figure out how to create systematic change. There are so many women I have met, know well and have heard about who are tireless supporters of other women. I honor you all.

Men, collectively, have failed too. FAILED. They have failed to make the world a more just, equitable and safe place and I truly question whether that was even on the agenda. Their failure however comes from a a place of power. The powerful failed to take care of the powerless. As mentioned above, Jeff Sachs spoke today about the failure of the past two administrations to care anything at all about the poorest of the poor. Power. Resources. They had it all, and they failed to use it wisely. It was such a time of economic prosperity in this country, as fake as it might have been, and that period is now over. What an opportunity for leadership wasted.

Men remain the decision makers and where we are at this moment is the responsibility of collective male leadership. Hey, men in power, do you know what women would do right this moment if we were in your shoes? If our collective decisions resulted in the same outcome? We would ask for forgiveness and then we would ask for your help. Invite us to the table damn it or at least open the damn door. Although I am tempted to say move over, the right solution, the possible solution, is really in at least sharing the power. I love good men as much as I love good women, so come on guys, be part a sustainable solution. Try something different.

In my professional life so far (20 yrs) I have seen basically no progress for women, and arguably at this moment of financial and economic crisis, women are virtually absent in the decision making. That is heartbreaking for me. Sure you can name a couple of women, but that is just it, a couple.

Are more women running in senior management positions in investment banks/banks versus when I started in 1988? Nope – none then, none now.

Are more women running major corporations in general? No.

Are more women running this country politically? Not really.

Are women running the money at hedge funds and private equity funds? Nope. A few is not critical mass and it takes critical mass to know what women's presence and leadership looks and feels like.

So my friends and I talked about that for a while and then I was asked to stop yelling as I was disturbing the other diners. We then moved on to marriage, motherhood, fertility, and adoption to close out the evening.

As I sit here, now at 1:00 am, typing this completely imperfect entry about my life, I am brought back to many such evenings when I used to work at Goldman Sachs so many years ago. I would come home after a long day, unable to sleep, and get up and write about all that happened that day in my journal. Now I have my blog. Usually, back then, it was because I had spent some ‘couch time’ with a woman/women professional(s) at the firm that needed career advice and I was trying to figure out how to help her, or better yet, how to create an environment at the firm where she did not need help. I tried so hard to create change, or even the possibility of change. My heart was broken at Goldman Sachs, and that is why I left.

It took time with my family, time with my sisters at CFG, time serving on non-profits that serve women and girls, time meeting some of the most fabulous women on the planet that has brought healing. My heart is mended, in fact it is bigger then ever (remember how the Grinch Stole Christmas), and I am ready for a revolution. A leadership revolution.

Leslie asked me today, “Jacki, do you miss working at Goldman Sachs?” Honestly, it took me a while to answer. Although I left for all the right reasons for me, I miss more than anything the platform from which I could hope to really make a difference. The world cares about the platform and it has very specific ideas what that platform looks like. We don't as a society value the work that women do (back to Leslie Bennetts book). We value money and the pursuit of money as the endgame. Women generally see money as a means to an ends and not the end itself. Even when women do have a platform and money we, as a society, try to knock them down. Why don't we celebrate women and celebrate their success??? I just don't get it.

As a perfect example (don't) pick up this month's issue of Bloomberg Magazine. The cover story is about Lloyd Blankfein. Inside you will find a fold out containing 41 faces, 40 of them are white males. Granted some of these guys, most of these guys, have done amazing things, but where are the women? Where is Ann Kaplan? Ann, one of the first women partners of Goldman Sachs who created the Women and Financial Education Program at Smith, serves on two corporate boards and teaches at Columbia Business School for FREE. She also serves on the Boards of Columbia University, Columbia School of Business Board of Overseers, Smith College, The American Red Cross, The Museum of Arts & Design, and Women's World Banking. She is a member of the Committee of 200, the International Women's Forum, the Economic Club of New York and the Council on Foreign Relations. Ann, who after leaving Goldman created a community of high-net worth women that controls sigfinicant amounts of investable and charitable assets, is not even listed. In her spare time she teaches women around the world the basics of investing and how to get financial organized. Where is she on the list in Bloomberg Magazine? One by one I could list all of the 14 pre-IPO women partners at Goldman and tell you the incredible things they are doing to create a most just an equitable world. We are not spending our time shopping, we are driven, we are serving, we rock.

Don't get me started. Shame on you Bloomberg. Where is the sidebar that lists so many amazing ex-women of Goldman? If that article is not a testament to our culture and to power, I don't know what is. This country, the media, our world in general does not look for women leaders.

It is such a tragedy that when we are at the peak of our careers in corporate America, when the world needs us to be that tireless advocate and role model for change because we have the platform that the world values, we have the least time to do it. Too often when we do make the time to do it, we are not rewarded for it by our organizations; dare I say we are often punished. I often thought about writing that book about my experience working for Hank Paulson, John Thain and John Thornton in the executive office of Goldman Sachs. I spent two years working on diversity programs and other human capital management initiatives. Someday.... So sometimes we leave because we do want the time to serve others, not just serve our checkbook, and the world pulls away that platform.

So what needs to change? Not only do women have to more fully claim their space as credible leaders at all levels and in all places (thank you Chris Grumm for the language), but we need to change the space to reflect our collective values. We need to be about doing the right thing, not the easy thing. We need to think about long-term solutions, not short-term fixes. We need to care about the common good alongside what is good for me. We have to help and support one another. Bigger. BOLDER. Go where no woman has gone before. We need to grab our power tools - our skills, our passions, our financial resources, our influence, our networks to make change happen. "Do what you can with what you have where you are." We need to get ourselves in to the rooms where decisions are made that determine our children's futures.

Men also need to want it to happen. They need to make it happen. Has the damage done in the worlds economic and financial crisis, $13 trillion of wealth destruction since January of this year, been enough of an event to say, hey, let's do it differently next time? Is the fact that financial institutions are failing and governments are claiming insolvency enough to wake us up? Is spending hundreds of billions in taxpayers' hard-earned money to bail a collection of bad decisions enough?

Let the difference next time around be women's leadership and presence! Let's start a revolution. Enough is enough. You have had your turn, now move over and make space.

So it is time ladies... claim your space. Let's see what women's leadership looks like. And for all the good men in the world that will help make it happen, God bless you.

Good night and thanks for reading.

And to Vikram – my new friend from the train this evening, with who I shared all this, I hope I somehow touched your life too. “Be the difference you want to see in the world” and good luck with your studies.

Sunday, October 26, 2008

If you are reading this, thank you, and please take a minute to add your email address in the red box to the right. You will NOT get new blog entries to your email, but you will get an upcoming newsletter. Warning... this is a long entry, and it does not scratch the surface of what is going on! For the meaning of the Canadian flag you have to make it to the bottom of this entry.......

Last week was a horrible one for global equities, and in particular for many emerging markets. Andrew Barry’s piece in this week’s Barrons – That Was Way Too Close For Comfort – provides a great overview. On the second page of the article you will fund a summary of the weekly and YTD performance numbers for most major markets. Needless to say it is not pretty. US equities lost almost 7% on the week and are down 40% on the year. Though that is clearly worth losing your breakfast over, China is down 65% followed by India at 57%. You may be quick to remind me that those markets also moved up the most over the past few years, and you would be right. They, unlike us however, continue to grow at a healthy rate and have issues very different from those in the US. Though China in particular is sure to suffer with the decrease in US demand, there are more than a handful of reasons why they are likely to recover much faster and not the least of which is that their government has $1.8 trillion in reserves that they can spend, and they are not suffering under massive budget deficits. If you turn to the back page of the ECONOMIST ( my favorite magazine and an absolute must read for anyone who wants the easiest way to stay current on almost everything you need to know about the world of economics and finance), you will find that China had a $371 BB current account balance in 2007. Though that will most surely decline, positive numbers in general are a very good thing.One comment that drew my attention related to US stocks. It makes me nuts when people say that stocks are cheap just because they are down a lot. That might well be a reason to think they might be cheap, but generally it means that something has fundamentally changed. When it comes down to stock valuation I look first to price/earnings ratios.Andrew Barry says….

“VALUATIONS OF STOCKS LOOK pretty reasonable, even assuming marked earnings declines. The S&P 500, at 876, is trading for just 10 times 2007 operating earnings of $85. This year's profits will be a disaster due to write-offs and losses, and the 2009 earnings outlook remains uncertain. Citigroup analysts see $79 in S&P earnings, but even assuming $70, the index is valued at less than 13 times earnings. The dividend yield on the S&P 500 stands at 3% and the price/book ratio is 1.8 times, versus 3.3 a year ago.”

Even modern history tells us that Bear Markets can take stocks much cheaper than that. I made note in my journal of a great piece written earlier in the month by Jason Zweig from the Wall Street Journal that provides a great history lesson. He states

“But when the stock market moves away from historical norms, it tends to overshoot. The modern low on the Graham PE ( which divides the price of major US Stocks by their net earnings averaged over the past 10 years) was 6.6 in July and August of 1992. "

Others I have spoken to say that PEs at the bottom are in the 8 to 9 times forward (often deeply pessimistic) earnings. Though I am hopeful that stocks find a bottom, it is a stretch to say overall they are a buy.

Despite me writing about equities the story this week was really one of currencies. There were so many educational pieces I just have to highlight a few below. A quick look at the table published daily in the WSJ tells its own story. If your currency was not pegged to the dollar, and you were not the Yen, your currency got hammered! I cannot begin to tell you the problems this is causing around the world. Again, a subject of a longer piece…. But in short, Bretton Woods Two Baby, Bretton Woods Two.

First it was a list of mortgage bankers that were going under, then banks, then investment banks now it is companies, hedge funds, and countries. Countries. It seems EVERYONE has their hand out and I worry deeply that there is just not enough money ( particularly US dollars) to go around at the moment.

Last note – The folks in Washington, and for that matter all government officials and central bankers, need to either refresh themselves or learn some basic economics in order to plan how we are all going to get out of this mess. Sadly what they are likely going to learn if they take a macro economist to dinner is that it is not going to end nicely. You cannot just go on spending your way out of the problem. The irony is that historically when the US has offered help to countries who faced currency and debt crisis due to overspending the only way we would help is if they introduced hard core fiscal discipline. Now the US is the country that has been fiscally irresponsible ( as have others) , but because we are the reserve currency, ours is the one that strengthens ( short term )??? The arguement goes that we are so much better off then the countries that are in currency crisis, but really? This US dollar strength cannot go on forever. There will be no soft landing of the US economy. Do some preparing for the worst and be pleasantly surprised if the worst does not happen.

Last last note - As a Canadian what is going on in the C dollar makes no sense longer term. No sense. Stronger banks, positive trade balance, positive current account - very nice people and the Olympics in 2010. It makes no sense... buy Canada.

Saturday, October 25, 2008

If you are thinking about adding to equity positions before the end of the year by means of a mutual fund, please be sure to read this piece. Despite the losses experienced by almost all funds this year, they may still have underlying taxable gains that have been realized. Such gains will be paid out in a distribution to the holders of record on that distribution date. What that means is that you may buy in to a fund for which you have no gain, and yet be hit with a tax bill. Funds are in the process of announcing their results and do publish their distribution date. Be sure to check on the information as it relates to the fund you are considering.

If you feel like the timing is right to add to equities, and do not have the time or inclination to do the research relating to mutual funds, consider an ETF for quick exposure. Two great site for information on ETFs are http://www.etfconnect.com/ and http://www.etf.com/ .

Friday, October 24, 2008

When you turn on your televisions today you are going to find that a meltdown has happened overnight in global equities. Trading in US equity futures has been suspended since stocks are down the limit. Market Indexes are now well below prior closes as the wave of selling of everything, everything, continues. In currencies that US dollar and YEN exploded versus almost everything else. Today might well be the capitulation day.

I just watched by good friend Ron Baron of Baron Capital on CNBC, speaking from his conference at Lincoln Center ( where I am suppose to be at the moment.) He is a great equity manager but right now the bottoms up fundamentals are moving so quickly who the heck knows how to value anything? Isn't that the real problem at the moment? I am going to listen to my equity coach ( Ron) at some point and put more money in the stock market but for now I am happy to sit on the sidelines. I am less concerned with missing a bottom then I am about having some basic understanding about how things are going to turn around. Have a great conference Ron and I am sorry I am not there with you. You know how to throw one heck of a party!

As an aside - I have been getting very thoughtful emails about the various gov't programs that are being set up to rescue our financial markets. Here is a great write up by Orrick law firm about the Temporary Liquidity Guarantee Program.

Late Day Comments

OIL - One of the trades/investments I did today was by Oil through at ETF. I do not think that the producing nations will let oil settle at these price levels or if they can help it, go lower. Their economies are in deep do do and they need higher prices to help them get bailed out. They will cut production.

Canadian Dollar - I think the Canadian dollar is oversold and so are thier resource stocks. I am taking a hard look at trading my US dollars or Canadian and buying both oil and gas and gold stocks. I already have that, but doing more seems to make a lot of sense.

Equities - I think it is a good sign that the US Markets did not close down more today. I don't know if we have reached the bottom as the market is now turning to earnings reports for guidance, and they will not be pretty, but today's close gave me a little hope. ( well off the lows)

Currencies - The Yen moved as high as 91 today against the dollar before it swung back. We are seeing currency swings that are absolutely unprecedented. Intervention may be likely soon on the YEN and for that matter the US Dollar. I would think we will see some reversals next week.

Have a GREAT weekend.

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One other note - Please forgive typos that you are going to see in these entries. With limited time and endless thoughts and information to share I don't always have time to edit. Thanks for understanding and I hope you find the quality of what you read well worth tolerating the occasional mistake.

Thursday, October 23, 2008

JSMINESET is a web-site that many of my GOLDBUGS read written by Jim Sinclair. Occasionally, and especially when am looking for a reason to get depressed, I read it. There is a lot on this site that I agree with, and I a lot I do not. You can judge for yourself. What I would like to point out this evening is an interview with Jim Rogers, author of many investment books - all of which I would suggest . ( scroll down to find it on the site, sorry I could not find it on CNBC) Quite some time ago I enjoyed a lovely dinner in his home with a group of friends and he is one smart cookie! This is a feisty interview so sit down, pour yourself a glass of wine, and enjoy.

He is saying what my husband has been saying for some time. All this talk of deflation is not really deflation. Yes prices are falling, but the final outcome will be massive inflation. If you want to get an understanding of what that 'could' mean... read more on the site. I am warning you, pour yourself an even bigger glass of wine first and prepare for some restless sleep.

For educational purposes here is the downward spiral that Jim is predicting for the US Economy. You might not agree, but it is indeed logical.

Jim’s Formula:September 1, 2006

1) First interest rates rise affecting the drivers of the US economy, housing, but before that auto production goes from bull to a bear markets.

2)This impacts many other industries and the jobs report. An economy is either rising at a rising rate or business activity is falling at an increasing rate. That is economic law 101. There is no such thing in any market as a Plateau of Prosperity or Cinderella - Goldilocks situations.

3) We have witnessed the Dow rise on economic news indicating deceleration of activity. This continues until major corporations announced poor earnings, making the Dow fall faster than it rose, moving it deeply into the red.

4) The formula economically is inherent in #2 which is lower economic activity equals lower profits.

5) Lower profits leads to lower Federal Tax revenues.

6) Lower Federal tax revenues in the face of increased Federal spending causes geometric, not arithmetic, rises in the US Federal Budget deficit. This is also true for cities & States as it is for the Federal government.

7) The increased US Federal Budget deficit in the face of a US Trade Deficit increases the US Current Account Deficit.

8) The US Current Account Balance is the speedometer of the money exiting the US into world markets (deficit).

9) It is this deficit that must be met by incoming investment in the US in any form. It could be anything from businesses, equities to Treasury instruments. We are already seeing a fall off in the situation of developing nations carrying the spending habits of industrial nations; a contradiction in terms.

10) If the investment by non US entities fails to meet the exiting dollars by all means, then the US must turn within to finance the shortfall.

11) Assuming the US turns inside to finance all maturities, interest rates will rise with the long term rates moving fastest regardless of prevailing business conditions.

12)This will further contract business activity and start a downward spiral of unparalleled dimension because the size of US debt already issued is of unparalleled dimension.

Therefore as you get to #12 you are automatically right back at #1. This is an economic downward spiral.I heard all this "slow business" as negative to gold talk in the 70s. It was totally wrong then. It will be exactly the same now."

Wednesday, October 22, 2008

It is simply impossible to keep up with what is happening in the financial world, nevermind the the real economy. I am so overwhelmed by the magnitude of the actions that are being taken, and lie awake at night trying to think about the short term and long term consequences. Today what grabbed my attention besides the governments $540 billion program to buy commerical paper, the crashing equity markets, and the horrible earnings annoucements, was the mind-blowing currencies swings.

I am Canadian and have assets in Canada. There was a time not so long ago when a Canadian dollar was worth more than a US dollar, and it has since moved 25%! 25 %! Only a few short weeks ago at the local Tim Horton's in Kelowna BC my parents friends were telling me about the houses they were planning to buy in Arizona now that the prices were down so much. Now I am hearing people are walking away from their deposits. The good news is Canadian real estate is looking very attractive to Americans, but who has money to buy?

Today in the Wall Street Journal we read about how "Big Currency Bets Backfired" leading to huge losses. Huge. It is well worth subscribing to the journal on line just to read this article. In a lengthy piece they attempt to explain why all this is happening. In short it is all part of this massive deleveraging and flight to safety process that is happening. US dollars that have made thier way abroad are now being pulled back home which involves selling out of that local currency and buying US dollars. In addition you have parties abroad (particularly corporations) that have either sold US dollars in anticipation of receiving them, which is now not happening as a result of the slow down, or they outright shorted dollars in favor of other currencies and are being forced to cover. Another reason is that in many countries interest rates are a lot higher and it is now expected that they will be cutting their rates which translates, all else being equal, to a lower value of that currency. ( an old concept I remember from school called interest rate parity and an unwind of the carry trade in which you park money in bonds denominated in currencies that have higher interest rates) Despite the massive injections of liquidity in to the market the world is short dollars. More importantly the world of US dollars is one of the haves and have nots. Certain countries have swap lines with the US Federal Reserves, and others do not.

For those who continue to want US Treasuries you are going to get lots of them in the coming year. The US is going to be borrowing a massive amount of money next year. Massive. This is a subject of another piece but one of the main things that keeps me awake at night. Who is going to buy all the US treasury bonds that we have to sell and at what rate?

A quick note in general on emerging markets - my hedge fund friends are telling me that we are going to continue to see a flight out of both equities and bonds possibly to levels we have not seen for years. Deflation is the word of the day and it is a pretty scary word.

A further note on GOLD - it broke through $740 an oz level today, in part because of the strength of the US Dollar. Gold is no longer todays trade but I still believe it belongs in a portfolio as insurance. There is a scenerio where the world goes back to some kind of gold standard. I cannot imagine, imagine, the impact of these dramatic swings in currencies. A strong US dollar is not necessarily a good thing as it chokes of exports big time. Exports have been a positive for the US economy this past while.

Tuesday, October 21, 2008

Yesterday I had the honor of attending a panel discussion at Columbia University entitles “Can We Save the World Economy”, with featured speakers George Soros, Nouriel Roubini , Jeffrey Sachs and moderated by the wonderful John Roberts of CNN. Further I had the pleasure of an intimate dinner following the event at which the dialogue continued. The main question asked of the panel was how did we get in to this current situation and what now?

George Soros’s answer revolved around his view of the markets more generally and is well explained in this OPED he wrote in January. A bubble was created in the US housing market due to low interest rates, excess leverage, financial engineering, lack of oversight, disintermediation and the belief that markets are, generally speaking, self-correcting. Though he suggested that we likely have past the breaking point in terms of the averting a financial crisis, the effect on the real global economy is significant and taking hold.

Nouriel Roubini, the prophetic NYU economist, has been predicting this crisis for some time. He added specifics on the bigger picture overview provided by Mr. Soros, further explaining the causal factors that led us to this breaking point. He was particularly critical of the role of the shadow banking system, those non-bank financial entities including mortgage lenders, investment banks, hedge funds, Fannie Mae, Freddie Mac and the list goes on. Like banks these institutions generally borrow short, invest long, employ loads of leverage and are susceptible to runs on their asset base. What we are clearly witnessing is the fall of this system. As for the effects on the real economy he predicts a U shaped recession lasting 12-24 months depending on the collective policy responses. He described us as having a “Subprime Financial System” and that limiting the collateral damage on the real global economy is now the number one goal.

Jeff Sachs, Director of the Earth Institute and Author of "The End of Poverty," closed out the evening’s formal remarks. He pointed a direct finger at the Federal Reserve Policies under Alan Greenspan which kept interest rates too low for too long and for failing to effectively regulate the financial markets over time. America, Americans, have too much debt and it is going to get worse before it gets better. That debt has to be paid bank and that will and should mean higher taxes in this country.

As for the question that was to frame the discussion, Can We Save the Global Economy? Sad to say that even over dinner the answer was not an obvious one. There was general agreement in the room that a significant recession was unavoidable. As to the ultimate damage to the domestic and global economies? Really impossible to know. Aggressive government and central bank action will continue to be necessary, which is mindful of balancing the short term deflationary course, with the longer term inflationary one.

So what does she think about how our central bankers and Treasury Department are doing? She thinks they are getting it wrong, again. Her arguement is that the primary problem is not one of liquidity, but credibility. Banks will not lend to each other because no one trusts each other, and so on down the food chain. Why would you lend to someone if you do not know with significant confidence that you are going to get paid back? Bottom line the issue right now is much more about solvency then it is liquidity.

Thursday, October 16, 2008

Last night I had the honor of attending the Gentleman’s Ball sponsored by GQ Magazine, with our dear friends Pete and Jane Hunsinger. Pete Hunsinger, Publisher of GQ, is the visionary behind the Gentlemen’s Fund. His idea was simple and beautiful – to use the brand of GQ to help raise money for charities to support five pillars essential to modern men – Opportunity, Health, Education , the Environment and Mentorship. Their motto: Better Men, Better World. Love it! They choose five celebrity ambassadors to partner with them in this effort, and you guessed it, Usher was one of them! Usher’s passion is in protected the environment and he is working with the Alliance for Climate Protection to make that happen. The event also featured a performance by Timbaland and man of man, did he rock the house!

For more information and to support this amazing initiative please visit their web-site.

To Pete Hunsinger – it is an honor to be your friend and thank you for being the change we all need to see in the world.

Tuesday, October 14, 2008

The equity markets forged a come back on Monday with news that around the world Governments were going to invest broadly in their failing financial institutions, including of course the US. This is good news and the markets responded enthusiastically. Banks need capital and they are getting it. The question for holders of financial stocks in general, and equities more generally, is whether it will be enough?

The IMF recently released a new report estimating that cummulative losses are expected to hit $1.4 trillion. To date banks around the world have raised something in the vicinity of $500 billion. $1.4 trillion of losses minus $500 billion of capital raised means that if those losses becomes realized, $900 billion of additional equity will be wiped out. The moves yesterday are the beginning of this process, not the end. They are right to be demanding preferred, because what will happen is that common shareholders will bear the brunt of further write-downs. If those losses continue to add up it is possible that despite these injections, common equity holders will get wiped out. There are still good banks and bad banks, ones that will survive, and ones that will fail. This is still so very far from over.

The bigger questions continues to be what is going to happen to the economy in general. The reports that I am listening to ( not just hearing ) are that we are definitely in a recession and it could be a prolonged one. In that scenerio I am not sure that equities overall are fairly priced, let alone cheap so I think one should continue to tread carefully.

Friday, October 10, 2008

Finally, I just could not take it anymore, I had to buy some US Equities. Of course I already own some equities, but other then hanging on with the managers I have liked, I have not bought a thing in this entire down trade and I finally just had to do it. I am not saying this is a bottom, but with equites down almost 50% from the highs I just had to do it. Perhaps it is my way of saying I have faith that the world will be ok. There is so much dislocation and craziness in terms of what has changed in our economic world over the past few months I do not even know where to begin.

Here are just a couple highlights in terms of the impact: ( as of last nights close)- S & P down 38% on the year- World equities down 40%- European equities down 39%- Chinese equities down 62%- Industrial Stocks ( XLI) down almost 50% from it's high on Oct 1 2007- Oil ( USO) down over 40% from July 7 2008 high- Credit Markets still an absolute mess but with glimmers of hope

Despite the markets being down a lot a bear market typically does not end until the news starts getting better and not worse. There is no doubt that corporate earnings are on their way down, and the question really is how bad will it be and at this point what is priced in to the market. Bear markets can have some wicked bounces and this market is so oversold then it might just be time. Some very smart equity managers I know are telling me there are some buys of a lifetime out there and I believe them, but as a person who does not buy and sell stocks for a living, it still feels really scary out there.

I am taking the weekend off from writing on the BLOG and from obsessing about the markets. Since I am Canadian I can say both Happy Thanksgiving and Happy Columbus Day.

Thursday, October 9, 2008

Regular readers of this BLOG have read about my opinions of GOLD as an investment asset a few times. Just this week a great piece came out from John Hathaway, manager at Toqueville Asset Management. I would highly recommend the read whether or not gold is of interest you. It is a great commentary from a very thoughtful guy.

Sign up as a subscriber( lower right ) if you have not already as once my list gets of substantial size, I will be working on themed newsletters that will be resource guides on a number of cool topics!

Wednesday, October 8, 2008

.... and what a day to remember. Sadly I did not spend the day having fun but instead I layed on the sofa watching financial news having been hit by a nasty flu bug. My earlier promise of a longer piece just will not happen but I will offer a few comments.

- The price action in equities today was wild. Up, down, up, close on the down. Not good. The markets should have reacted positively today as what occurred in the early hours was truly remarkable in terms of the global central banks offering a coordinated action. I guess trading overseas during the night was beyond horrible, which is the bad news.

- The equity markets are extremely oversold according to a friend who has watched this forever. That being said, the fundamentals ( earnings ) are heading no where but down. Has the market priced all the bad news in? In some sectors yes, others no.

Global Central Banks acted in a coordinated way this morning to lower interest rates. This is a good thing. Central banks need to show they can and will work together. What was especially impressive to me was that CHINA also acted. Will this be enough to put some floor below the equity market declines and declog the lending pipes? Likely not, but at least they threw out another airbag. Check back later today for a longer piece on the continued crisis.

A few words on the debate last night. Once again both candidates were disappointing. They had America’s attention, the opportunity to really tell us what they stood for and why, and it was the same old speech and the same old lines. It is not that I expected them to change their tunes, but at this moment of economic insecurity, we deserved more. On the economy and the crisis Senator McCain said he was going to get the government to buy up loans! What?? Senator Obama leaned on the rescue package just passed for ideas with little of anything new. Neither one took the opportunity to explain to American the 10-15 factors that contributed to this crisis thus allowing them to extend the dialogue beyond the finger pointing at predatory lending, Fannie and Freddie, and Wall Street. For all their calls for TRUTH and TRANSPARENCY they are modeling little of it. They need to be willing to get in front of this ‘great country of ours’ and tell us the truth. It may be that they have been so busy campaigning they do not really know what is really behind the situation except for the few talking points they have been given which is truly frightening. The problems right now are big, very big, but also very solvable. What it will take however is SUPERIOR leadership, SUPERIOR economic insight, and a true willingness to make the tough decisions in the SHORT TERM to ensure

I am in search of the onlines versions of all my fav leadership articles! Stay tuned... better yet subscribe to my email list for themed newsletters coming later this year.

Monday, October 6, 2008

Two posts in one day is unusal but called for today. First on the market. The news over the weekend out of Europe was horrible on top of poor performance out of the US on Friday despite a rescue plan from the Government. The deleveraging trade is continuing, both institutional and retail. Credit makes the world go around, and right now it is just not flowing. The list of problems continue to add up. Banks are not lending to each other as indicated by the high inter bank rate, and until that stabilizes and comes down, the whole system continues to be at risk. The commercial paper market continues to shrivel, which is the lifeblood of corporations around the world. Munis took it on the chin today, as retail investors continue to flee due to worries about liquidity and decreasing tax revenues. I could go on but you get the picture. Are we close to a bottom in equities? I continue to not have the answer to that one. There are a lot of things that need to happen likely before that happens, but that is the subject of a longer piece.

Now I just wanted to highlight a new piece written by Bill Gross, one of the world's largest bond investors and now Washington Insider. Given his now buddy buddy relationship to the big guys who were just written a $700 billion dollar check to start buying stuff, it is a commentary worth reading. I am looking hard at buying some of PIMCOs funds.

You will be glad to know that it is not all bad news out there. My dear friend, brilliant feminist scholar, and writer/teacher Deborah Siegel has just launched her group blog. Look no further to read the latest scholarblogging in sociology, science, history, psychology, business, women’s studies and international women’s development. In a world that is bursting with information but is often short on insight, turn to GirlwPen!

Friday, October 3, 2008

Today I had the pleasure of co-hosting a day-long gathering of incredible women donors. The program was Entitled “Advancing Your Philanthropy: A Retreat for Women who want to Change the World.” My fellow hostesses were the completely fabulous Barbara Dopkin, the articulate Helen Lakellyhunt, and the visionary Chris Grumm, CEO of the Womens Funding Network.

Why did we organize such a gathering and why in collaboration with the Women’s Funding Network (WFN)? First, we believe in the collective power of women working together to create a more just an equitable world. As philanthropists we know that our learning is a continuous process, and by gathering to share stories, insights, and ideas, great outcomes will follow. It is about assisting each other to be strategic in the giving of our time treasure and talent. At a time when all we seem to be able and talk about and read about is the downside of leverage, here is an example of the power of it. The framework was provided by the WFN because of who they are and what they know. They are a global network of over 120 Women’s Funds ( grant making organizations ) that have been working for decades to improve the lives of women and girls, and thereby families and communities. “As we know from long and indisputable experience, investing in women and girls has a multiplier effect on productivity and sustained economic growth.” United Nations Secretary General Ban Ki-Moon.

A word about the markets. My good ole trader handbook would say that the fact the equity markets traded down today is not a good sign. In theory there was good news, Congress passed the rescue bill, yet the market traded down. What the market was saying by trading down is “big deal” it does not really matter right now. The economic news that was reported this week was nothing short of disastrous. I had to read the auto sales numbers twice as I could not believe my eyes. Year over year sales were down north or 30% for most dealers, Unemployment was us, confidence was down…. You get the picture.

Some would say we are getting close to a ‘bottom’ but I would have to say, sadly, no. The worst news is not behind us. We are still in the eye of the hurricane and the storm is not going to pass quickly. The problems in the credit markets and the banking system more generally are massive and global. That does that mean we cannot have up days for the markets, we will, but as far as suggesting that we have changed fundamental direction, no. The value of global equities versus global credit product continues to be massively dislocated. That is the piece of a longer story which you can expect this week.

A word about the election. As you know if you have been reading this BLOG I do not touch on this subject, really at all, but I am called to write something now. Way back when the current administration began to slowly recognize that this country has a debt problem, a credit addiction in fact, they talked about adding resources to financial education. In the debate yesterday between Govenor Palin and Senator Biden not once did either candidate bring this us up. Though Palin did talk a little about personal accountability when asked what caused this crisis she looked right in the camera and said, “Damn right it was predatory lending.” Yes predatory lending was part of the problem, but it was so far from the problem. Both candidates had such an opportunity to talk to America about this issue and did not. Deeply disappointing.

I believe that if we, as a nation, taught our children about money, helped them to develop money skills including how to buy, spend, and give thoughtfully and responsibly, we would be in much LESS of a mess. For a great start with your children, this book is great. Raising Financially Fit Kids.

Thanks for reading, thanks for sharing this BLOG with your friends.

Please add your email as a subscriber as this fall I hope to start sending out some themes resource guides.

Wednesday, October 1, 2008

As I keep reminding my son when he asks me why mommy and daddy are glued to our computers and the financial news stations, "Matthew, this is a historic period in this country's financial history ." Though the performance numbers overall are certainly bad, I think it actually felt a lot worse. I cannot even begin to make a list of the financial firsts that occurred this past month, but I am sure somebody will. That is the subject of a longer piece.

A quick recap of the numbers instead ( CFG source)

S & P - down 9 % for sept -19.% for the yearDow - down 6 % for sept -18% for the yearTSX - down 15% for sept -15% for the year ( Canadian dollar down 6.7% for the year)MSCI EAFE - down 14% for sept - 29% for the yearMSCI Japan - down 11% for sept - 22% for the yearMSCI Emerging Markets - down 17% for sept -36% for the yearGold - up 5.6% for the month - 5.2% for the year

I think I will leave it at that for now but I wanted to share with you all again my favorite investment newsletter published by John Mauldin. I have been reading him for years and find his commentaries exceptionally insightful. Thank you John!